A November rise in base rates to 5 per cent is now firm favourite among City economists. That is when the Bank of England’s next Inflation Report comes out with its updated projections.
After surprisingly high August inflation figures, however, there seems less reason to wait. If the old inflation target were still in place, the Governor would be sharpening his quill to explain to the Chancellor why he was about to bust it.
Mervyn King said in August that there was an even chance that it would not stray too far from the current 2 per cent target within the next six months , but CPI has since averaged 2.45 per cent, more than the Bank anticipated. One more quarter point base rate rise should be enough.